Question 1

Entrepreneurs often form new small firms called "spin-off firms."

Accepted Answer

A) True 
 B)False

Question 2

The following can increase the profits of an innovating firm, except

Accepted Answer

A) new product introductions. 
B) existing product improvements. 
C) imitation of its innovation by other firms. 
D) successful process innovations. 
A) new product introductions. 
B) existing product improvements. 
C) imitation of its innovation by other firms. 
D) successful process innovations.

Question 3

Large, well-established firms are more likely to use retained earnings to finance R&D, while small start-up firms are more likely to rely on venture capital.

Accepted Answer

A) True 
 B)False

Question 4

About percent of business R&D spending is for basic research.

Accepted Answer

A) 1 
B) 5 
C) 20 
D) 75 
A) 1 
B) 5 
C) 20 
D) 75

Question 5

Entrepreneurs

Accepted Answer

A) work exclusively in government and university R&D laboratories. 
B) often form small companies called start-ups. 
C) are less likely to exist in service industries than in manufacturing industries. 
D) are engaged mainly in basic scientific research. 
A) work exclusively in government and university R&D laboratories. 
B) often form small companies called start-ups. 
C) are less likely to exist in service industries than in manufacturing industries. 
D) are engaged mainly in basic scientific research.

Question 6

Inventions and innovations can both be patented.

Accepted Answer

A) True 
 B)False

Question 7

As it relates to R&D, the expected-rate-of-return curve, r,

Accepted Answer

A) usually slopes upward. 
B) shows the cost of financing various levels of R&D. 
C) varies in location depending on the location of the interest-rate cost-of-funds curve, i. 
D) represents the marginal benefit element in the MB = MC decision framework. 
A) usually slopes upward. 
B) shows the cost of financing various levels of R&D. 
C) varies in location depending on the location of the interest-rate cost-of-funds curve, i. 
D) represents the marginal benefit element in the MB = MC decision framework.

Question 8

A firm should increase the amount of R&D expenditures to

Accepted Answer

A) the maximum amount of funding that is available to the firm. 
B) the point where the expected return equals the cost of funds. 
C) a critical minimum level so that the firm can remain competitive. 
D) a point where the difference between the expected return and the cost of funds is at a maximum. 
A) the maximum amount of funding that is available to the firm. 
B) the point where the expected return equals the cost of funds. 
C) a critical minimum level so that the firm can remain competitive. 
D) a point where the difference between the expected return and the cost of funds is at a maximum.

Question 9

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later.The firm will

Accepted Answer

A) not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C) undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D) undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. 
A) not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C) undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D) undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.

Question 10

A firm decides to make a $20 million expenditure on research and development that will create a new product.This product is expected to increase the firm's revenues by a total of $24 million in the next year.The firm also estimates that the production cost of the new product will be $22 million.If the firm has to take out a loan to finance the project, what is the highest interest rate it will pay and still do the project among the choices given?

Accepted Answer

A) 8.3 percent 
B) 9.1 percent 
C) 10 percent 
D) 20 percent 
A) 8.3 percent 
B) 9.1 percent 
C) 10 percent 
D) 20 percent

Question 11

Technological advance is a three-step process of

Accepted Answer

A) product development, production, and marketing. 
B) creative destruction, start-ups, and patenting. 
C) breakthrough, consolidation, and distribution. 
D) invention, innovation, and diffusion. 
A) product development, production, and marketing. 
B) creative destruction, start-ups, and patenting. 
C) breakthrough, consolidation, and distribution. 
D) invention, innovation, and diffusion.

Question 12

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut and Papa John's introduced a similar pizza.This imitation illustrates

Accepted Answer

A) innovation. 
B) invention. 
C) creative destruction. 
D) diffusion. 
A) innovation. 
B) invention. 
C) creative destruction. 
D) diffusion.

Question 13

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Question 14

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Accepted Answer

A) inverted-U theory of R&D. 
B) average product of R&D theory. 
C) bell-shaped-curve theory of product innovation. 
D) theory of increasing and diminishing returns. 
A) inverted-U theory of R&D. 
B) average product of R&D theory. 
C) bell-shaped-curve theory of product innovation. 
D) theory of increasing and diminishing returns.

Question 15

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of

Accepted Answer

A) diminishing marginal returns from R&D activities. 
B) economies of scale in R&D projects. 
C) average fixed costs of R&D projects. 
D) the law of supply for R&D expenditures. 
A) diminishing marginal returns from R&D activities. 
B) economies of scale in R&D projects. 
C) average fixed costs of R&D projects. 
D) the law of supply for R&D expenditures.

Question 16

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Accepted Answer

A) True 
 B)False

Question 17

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Accepted Answer

A) True 
 B)False

Question 18

Product innovation will be successful only if it makes the product's

Accepted Answer

A) marginal utility increase. 
B) price decrease. 
C) marginal-utility-to-price ratio increase. 
D) marginal-utility-to-price ratio decrease. 
A) marginal utility increase. 
B) price decrease. 
C) marginal-utility-to-price ratio increase. 
D) marginal-utility-to-price ratio decrease.

Question 19

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Accepted Answer

A) number of firms in the industry. 
B) length of time for government patents. 
C) scientific character of the industry. 
D) imitation problem in the industry. 
A) number of firms in the industry. 
B) length of time for government patents. 
C) scientific character of the industry. 
D) imitation problem in the industry.

Question 20

If an R&D activity is affordable, the firm should spend on that activity.

Accepted Answer

A) True 
 B)False

Exam 15: Technology, Rd, and Efficiency

Entrepreneurs often form new small firms called "spin-off firms."

The following can increase the profits of an innovating firm, except

Large, well-established firms are more likely to use retained earnings to finance R&D, while small start-up firms are more likely to rely on venture capital.

About percent of business R&D spending is for basic research.

Entrepreneurs

Inventions and innovations can both be patented.

As it relates to R&D, the expected-rate-of-return curve, r,

A firm should increase the amount of R&D expenditures to

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later.The firm will

Technological advance is a three-step process of

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut and Papa John's introduced a similar pizza.This imitation illustrates

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Product innovation will be successful only if it makes the product's

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

If an R&D activity is affordable, the firm should spend on that activity.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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